Foreign direct investment to SEE: the case of Croatia.

Abstract

Foreign direct investment in transition economies generally is being attracted by perspective markets, cheap labor force and economic freedom. Croatian economy in the very early stage of transition in the beginning of 1990s was very promising according to all above mentioned parameters. Country showed stern will to enter EU, cost of labor force was quite cheap and governmental course towards free market through privatization was clear too. However in the course of time policy of Croatia undergo a change. Namely anti-corruption drive did not manage to reach stated objectives, although according to various international organizations decisive actions in this way were implemented by country authorities. The legislation, judiciary system and pyramid of power together, which entered the transition period together with economic system, have not completed it until now. If we add to this very low qualification of Croatian labor force it is getting clear that FDI inflow to such transition country should not live up the expectations which are usually ascribe to foreign direct investment. This and some other factors resulted on low economic growth level of Croatia, although FDI inflow amount to country was not low, especially in 2008. Nowadays Croatia faced another very serious challenge on its way to FDI attraction, the aftereffects of 2008 economic crises. Even if Croatian authorities overcoming all difficulties and self-inefficiency will manage to completely restructure existing economic, legislative, judiciary etc. systems (the goals which they couldn’t achieve during last 20 years), the real rise and productivity of FDI to Croatia will not rise until EU member-states (the main investors to Croatian economy) are completely recovered. The financial difficulties which EU countries still face significantly reduce the amount of FDI to the region in general. This especially concerns to Greece, which used to be the main investment gateway to SEE.